Current business processes for Point of Sale (POS) accept various forms of payment for merchandise such as checks, credit cards, debit cards, or cash. For example, a customer may purchase a product with a credit card from a merchant at the merchant's store or electronically via the merchant's web site. The merchant will process the credit card payment, electronically communicating with the credit card company to verify that the credit card company is willing to pay the amount of currency described by the merchant for the transaction. Once the transaction is authorized, an approval code is provided to the merchant and the merchant completes the transaction by providing the customer with a receipt that includes the product and some description to identify the form of payment like the credit card utilized for payment.
Unlike credit card, debit card, and cash transactions, however, transactions in which the purchaser pays for merchandise by check involve an additional delay in processing, which is referred to as a ‘float’ period. The delay is disadvantageous for both the merchant and the merchant's bank and involves duplicative efforts by the parties. More specifically, processing and clearing a check currently takes about 36-72 hours from the time a check is written until it is actually paid out of the purchaser's account. One of the reasons for the delay is that the paper checks must be sent to a check clearinghouse like the Federal Reserve Bank/Clearinghouse where the amount of the check is manually entered and printed on the bottom right edge of the check. Then, the check is sent to the bank of the purchaser where the check is sorted, scanned, recorded for the monthly statement, and the money is finally deducted from the account. Thus, the purchaser gets the advantage of the 36-72 hour ‘float’ period because the purchaser receives goods, services, cash, etc., while the actual money represented by the check remains in the purchaser's checking account, drawing interest.
The merchant's bank is disadvantaged because the merchant's bank will show the balance of the check in the merchant's bank account for the ‘float’ period. Further, the merchant is disadvantaged because the merchant will not know during the delay, possibly for several days, whether the check is actually good, i.e., whether the purchaser actually has sufficient funds available for the transaction, and, even if the purchaser does have the funds available, the funds that show in the merchant's account may be placed on hold by the merchant's bank until they are actually received or for some standard number of days to make sure that the funds are received before being available to the merchant.
Merchants who accept payment by check at the point of sale usually run the check through the point-of-sale (POS) terminal in order to request service from the check clearinghouse and to print certain merchant information on the back of the check. In the case where the check is accepted by the merchant, the current technology requires substantially manual data entry of the purchase amount into the POS terminal by the cashier; the purchaser's identification, such as a driver's license number and sometimes telephone number by the cashier; and the merchant's account information for depositing the check in the merchant's account.
Once the check is accepted, the merchant collects the checks received throughout a given period, usually a day, and deposits these checks at the merchant's bank. Then, the bank and the check clearinghouse will process the check information as one of the steps in clearing the check. This is typically a manual process involving keying in and printing on the check (using Magnetic Ink Character Recognition ‘MICR’ such as an E-13B font with 14 characters), the amount of the check, duplicating the efforts of the cashier.
After the merchant, merchant's bank, check clearinghouse, and purchaser's bank process the check, the purchaser finally receives the cancelled check or a scanned image of the check. In situations wherein the purchaser's bank supplies the purchaser with a scanned image of the check, the purchaser's bank generally provides the scanned image to the purchaser as hardcopy or on the Internet.